& Tony Alexander Mortgage Advisers Survey – December 2022

More buyers withdraw

Each month we invite mortgage advisers around the country to give insights into developments in the residential real estate market from their unique perspective. Our latest survey, undertaken last week, attracted 52 responses.

The main themes to come through from the statistical and anecdotal responses include these.

  • For the second month in a row increases in mortgage interest rates have made buyers step back from the market. Many no longer qualify for a loan.
  • A theme in adviser comments about bank willingness to lend is that outside of test rates rising, banks are loosening credit criteria and more actively welcoming business.
More or fewer first home buyers looking for mortgage advice
The net proportion of respondents in our monthly survey saying that they are seeing more first home buyers coming forward for advice has fallen back into negative territory for the first time since July. A net 17% now are seeing fewer young buyers as opposed to a net 13% last month seeing more and a strong net 48% in both September and October.

Comments on lending to first home buyers submitted by advisers include the following.

  • Test rates have increased to 8.60%.
  • LVR restrictions is still the killer. If clients do not meet First Home Loan criteria its very difficult to get funding. There are willing participants but the limitations on low deposit funding as well as aggressive affordability tests are hamstringing many potential borrowers
  • Slight loosening underway. Flatmate income increased x 2 lenders.
  • If they don’t have 20% deposit or a family supporting property don’t bother applying.
  • No change, but I notice everyone seems happier and therefore more willing to take the time to try and work out ways of reducing the obstacles to the approval and getting declines overturned.
More or fewer investors looking for mortgage advice?
The net proportion of mortgage advisers saying that they are seeing fewer investors has gone back to levels in place since early-2021. The months of September and October now stick out as aberrations. The reduced negativism then came about before mortgage interest rates were raised 0.5% for two months in a row.

Comments made by advisers regarding bank lending to investors include the following.

  • The removal of tax deducibility has significantly removed huge amounts of servicing capacity, as a result it pushes a lot of investors to use 2nd tier/nonbanking lending.
  • Slight loosening underway. Better rental shading starting to be implemented by one lender.
  • No investment loans completed last 6 weeks.
  • Nonbank lenders look to be providing alternative options here. As the interest rates go up the nonbank lender products seem more suitable for investors.
More or less lenders willing to advance funds?

This question gives us insight into something no other survey does – bank willingness to lend. At a time when all other indicators have deteriorated in this survey, that of real estate agents plus my Spending Plans survey, we see a still positive result here. A net 2% of advisers have reported that bank willingness to lend is improving. This is down from a net 10% last month, but the fact that the reading is still positive when so much other woe is out there tells us something important.

Banks are becoming used to working with the tougher Credit Contracts and Consumer Finance Act, and their desire to make loans to meet sales targets and make profits means they are pulling back bit by bit on criteria such as the proportion of rent they will count in income calculations, and allowance of boarder income being included.

What time period are most people looking at fixing their interest rate?
Almost all advisers report that borrowers favour fixing for two years. Only 10% say the preference is for one year and 8% that the preference is three years. None mention four or five year terms being preferred.
Preference for fixing two years has rebounded strongly following the two rounds of fixed rate rises.
The preference for fixing one year is a long way from the glory days of 2020 into mid-2021.
Few borrowers have wanted to fix for three years since the middle of this year.
Kiwis prefer the uncertainty of short-term fixed interest rates to the security provided by fixing for five years. This easily explains why banks in NZ do not offer to fix rates for longer than five years, let alone the 30 years prevalent in the United States.

Download the full report:

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute a financial advice service. The article is only intended to provide education about the New Zealand mortgages and home loans sector. Nothing in this article constitutes a recommendation that any strategy, loan type or mortgage-related service is suitable for any specific person. We cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you. Before making financial decisions, we highly recommend you seek professional advice from someone who is authorised to provide financial advice.

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